                              CONTRACTS OUTLINE

Prof. Greenberger
MCJ Fall 1997
REST.2ND, P.1:  Contract (“K”) is a promise or a set of promises for breach
of which the law gives a remedy, or the performance of which the law in
some way recognizes as a duty.
                     Chapter I. ENFORCEMENT OF PROMISES:
                       Section 1. MONETARY RECOVERIES
      1.1.  KINDS OF DAMAGES MEASURES
           1. Expectation interest:  put  P in the position he would have
      been in had the contract been performed (benefit of the bargain)
           2  Reliance interest: put P in the position he was before
           contract was made (out of pocket costs)
           3  Restitution interest: D to pay P an amount equal to the
           benefit which D has received from P’s performance.
      When expectation damages are uncertained, reliance damages may not be
a fair measure of recovery.

      1.  EXPECTATION DAMAGES.
Rest.2nd, p.347, Comment a:  Expectation  interest damages are ordinarily
based on  the injured party’s expectation interest and are intended to give
him the benefit of his bargain by awarding him a sum of money that will,
to the extent possible, put him in as good a position had K been performed.

Rest.2nd, Chapter 16 Introductory note:  Awarding damages on this basis,
gives the other party an incentive to breach K if but only if he gains
enough from the breach that he can compensate the injured party for losses
and still retain some of the benefits of the breach.

Hawkins v. McGee:  P’s hand is scarred from a severe burn.  P contracts
with defendant surgeon for a skin  graft operation which,  D promises, will
make P’s hand completely normal .  Not only does the operation fail to
correct the scar, but it also causes P’s hand to become covered with hair.
      Held, P may recover the difference between the value of a perfect hand
and the value of the scarred and hairy hand.  That is, plaintiff is awarded
expectation damages, i.e, the difference between what he would have
received had the contract been performed (a perfect hand) and the position
he was left in after D’s breach (a scarred and hairy hand).
      Note:  If Court were awarded reliance damages, it would have been the
difference between the scarred hand, which P had before the surgery and the
scarred and hairy hand which P had after the surgery.

Prof. in the class:
Three good reasons decided to file a contract suit, not the tort:
1.   measure of proof, standard of proof
2.    statute of limitation
3.    damages (in tort - difference in the hand - between before the
   surgery and after the surgery)

            1.1.  Calculating expectation damages.
Rest.2nd, § 347: Expectation damages = value of  D’s promised performance
(K price) - benefits received (if any). Benefits generally equal the money
P would have spent had K been performed.

(a)  Cost of completion or decrease in value.
Peevyhouse v. Garland coal & Mining Co.: P own a farm containing coal
deposits.  They lease the premises to D for a five year term, for the
purpose of allowing D to strip-mine on the property.  Because of the
unsightliness of a strip-mining operation, P insist that the lease contain
a clause requiring D to perform various work to restore the beauty of the
property at the end of the lease term.  P are unwilling to sign the lease
without these terms, and they are included.  At the end of the lease,  D
fails to perform this restoration work.  Evidence shows that it would cost
D about $ 29,000.00 to perform the work, because of great quantities of
dirt, which would have to be moved.  However, the value of the farm is only
about $300 less than it would have been had D performed this work.  In fact
the total value of the farm is less than $5,000.
Held:  only the diminution in value, $300 should be awarded.  Reasons:  (1)
provision of K requiring the remedial work was only incidental to the main
purpose of K; (2) economic benefit which P would have received from full
performance of the work was grossly disproportionate to the cost of
performing the work. (would be economic waste).
      Prof. agree with the decent opinion: construction was a part of
contract, D has to pay the whole amount.

(b) Economic waste.
Court is particularly unlikely to award the cost of completion where defect
is minor and its completion will involve economic waste.
Jacob & Youngs v. Kent: Contractor contracts to build a house for Owner.  K
specifies that Reading pipe must be used.  Contractor inadvertently
substitutes Cohoes pipe, which is of virtually the same quality as the
Reading.  Owner objects, and refuses to pay the remaining contract amount.
In a suit by Contractor for the remaining contract amount, should owner be
entitled to subtract from  the contract  price  the full cost of changing
the pipe (a large sum, since all of the existing plumbing would have to be
torn out), or merely the amount by which the house is  diminished in value
because of the substitution of pipe (a negligible sum) .
      Held, (1) Contractor may recover on the contract, since he
substantially performed; and (2) the correct measure of damages is “not the
cost of replacement, which would be great, but the difference in value,
which would be either nominal or nothing”.  To hold otherwise would cause
contractor to suffer forfeiture (konfiskovat) without any correspondingly
benefit to owner.
Dissent: This is not a case in which there was “unsubstantial omission”.
Owner contracting for Reading pipes and whatever his reason is is not
important.  He wanted that and he was entitled to receive that.
*Offer of alternative incompatible employment

Hussey v. Holloway:  P agreed with D that D will hire her for a season as a
trimmer.  When the season started D refused to hire P as trimmer but when
she threatened to sue, D offered her inferior (less valuable) position of
hat maker.  P refused but could not find any other comparable job and sued
D.
      Held,  Damages for breach of employment K may be recovered where
alternative offer various from the terms of original K, so that
subsequently offered employment is inferior to a previous offer.  (If the
offer where for the same or similar position K would still have been
breached but no damages would have been awarded.)

      2 FORESEABLITY .
Restat.2nd, p.351: follows Haley:
1. Damages are not recoverable before loss that the party in breach did not
have reason to foresee as a probable result of the breach when the contract
was made.
2. Loss may be foreseeable as a probable result of a breach because it
follows from the breach: (a) in the ordinary course of events, b) as a
result of special circumstances, beyond the ordinary course of events, that
the party in breach had reason to know.
3. A court may limit damages for foreseeable loss by excluding recovery for
loss of profits incurred in reliance or otherwise if it concludes that in
the circumstances justice so requires in order to avoid disproportionate
compensation.

Hadley v. Baxendale:  P operated a mill which was forced to suspend
operations because of a broken shaft.  P’s employee took the shaft to D
carrier for shipment to another city for repair.  D knew that the item was
a shaft for P’ mill but was not told that the mill was closed because of
the shaft.  D negligently delayed delivery of the shaft and mill had to
stay closed few more days.  P sued D for loss of extra profits for these
days.
      Held:  P can not recover lost profits as the profits were not a
consequence which “in the usual course of things” flows from the delay.
      Rules: The damages must either : (1) arise “naturally ,i.e. according
to the usual course of things  from the breach of contract itself (direct
or general  damages) or (2) arise from “the special circumstances under
which K was actually made if and only if  theses special circumstances
“were communicated  by P to D” (special or consequential damages).
Knowledge of consequential damages by D is NECESSARY.

        3.  RELIANCE DAMAGES.
Most contracts - the award of expectation damages will adequately
compensate the plaintiff.  In some contract situations, expectation damages
are not suitable, and reliance damages may be appropriate in the following
situations:
1.    P cannot show his lost profits with sufficient certainty, but can
   show items of expenditure (Security Stove case - see below).
2.    A vendee under a land contract sues the vendor for the latter’s
   refusal to convey the property to him, and the jurisdiction is one in
   which expectation damages are not awardable in this situation.
3.    There is no legally enforceable contract but P is entitled to some
   protection (cases invoking the doctrine of  PROMISSORY ESTOPPEL.

Reliance damages = contract price minus cost of completition.

(1)Reliance damages where profits too speculative
Rest.2nd, p. 349(a): The injured party may, if he chhoses, ignore the
element of profit and recover as damages his expenditures in reliance. He
may choose to do this if he cannot prove his profit with reasonable
certainty.

Security Stove and Mfg. Co v. The American Railway Express Co:  B is the
manufacturer of a combination oil and gas burner.  He wishes to exhibit his
machine at a convention in Atlantic City, in order to procure orders for
it.  He contracts with D, a shipping company, for D to deliver the machine
to the convention.  D breaches the contract  by failing to deliver on time.
      Held: B may not recover the profits which he would have made (from
new orders) had the contract been performed.  He may recover his expenses
reasonable incurred in preparation for the convention: sum paid to D, fare
for B and workman to At.City and back, the hotel, rental of conventional
booth, the wages of workmans, values of B’s own time.
      Notes: profits are denied because they are too speculative.  Court
awards reliance expenditures instead of, rather than in addition to, the
lost profits.  Court might well have prevented P from recovering his
expenditures, if D can show that P’s machine was impractical and P never
received any order for this machine.
            4. SUITS IN QUASI-CONTRACT.
There are some situations where recovery on the contract is either
impossible or not allowable.  4 general classes where P will often be
allowed to recover in quasi-contracts: 1. There was no even attempt to form
a contact, but P deserves some measure for   recovery (see Cotnam v. Wisdom
below)
2. There is an attempt to form a contract, but K is unenforceable due to
impossibility,   illegality, Stat. Of Frauds (Boone v. Coe below)
3.    There is an enforceable contract, but P has materiality breached, and
   therefore may not recover on the contract
4.    D breached materiality, but P is not entitled to damages on the
   contract.

Rest 2nd, p. 69: A sent B a book with a letter: pay within a week or notify
and I ‘ll send you a return label.  B gave the book to his wife without
replying.  Under 39 USCA, p.3009, merchandise mailed w/out the prior
expressed request or consent of the recipient
may be treated as a gift by recipient.

QUASI-CONTRACT WHERE NO CONTRACT ATTEMPTED.
Cotnam V. Wisdom: D is injured in a streetcar accident, and is unconscious.
 A bystander summons P, a doctor, to give D emergency medical aid.  P
performs a difficult operation and D dies.
      Held: P may recover, in quasi-contract, the reasonable value of his
services, even though there was never any attempt to negotiate a contract.
The fact that D died is irrelevant.  The value should be determine by
expert testimony as to the usual charge for this service.

Rest.2nd, p.370: A contracts to sell B a machine for $100,000.  After A has
spent $40,000 on the manufacture, but before its completion, B repudiates
the contract.  A cannot get restitution of the $40,000, because no benefit
was conferred on B.

Rest2nd, p. 371: A contracts by B to repair a roof for $3,000. A does part
of the work at a cost of $2,000 increasing the market price of B’s house by
$1,200. Market value for the work done by A is $1,800. A’s restitution
interest is equal to the benefit conferred on B.  That benefit may be
measured 2 ways: addition to B’s wealth -$1,200 or reasonable value of A’s
services - $1,800.  Depends who breached the duty: if A - $1,200; if B
-$1,800.

Boone v. Coe:  P had a verbal contract with D to rent the latter’s farm for
a one-year period commencing upon P arrival at the farm.  In reliance upon
this contract P moved to Texas from Kentucky, expending time and money in
doing so.  When P arrived to Texas, D refused to perform a contract.   A
parol agreement to lease land for an one year period commencing at a future
date is subject to the St. of Fraud.
      Held: Party may recover for expenses incurred and time lost in
reliance upon a contract which was unenforceable under St.of Fraud.
Generally damages cannot be recovered for the breach of contract which is
unenforceable under St.of Fraud, an exception to this rule permits a party
who has partially performed to recover for money paid, property delivered,
or services rendered in reliance upon the contract, provided the other
party has received some benefit from this part performance.
      In this case: P sustained a loss, D has received no benefits. So, no
obligation topay for the part performance can be implied.

                     SECTION 2.  SPECIFIC PERFORMANCES.
      Equitable relief could be granted.
      There are situations in which money damages can not compensate the
party.  Damages are too speculative or uncertain to be calculated.; or not
a substitute for D’s performance of K.  Specific performances could be
required in the following Ks:
1) Land-Sale K
2) Personal Services
3) Sale of goods

      Rest2nd.,p.359(a): Equitable relief would not be granted if the award
of damages at law was adequate to protect the interests of the injured
party. There is a tendency to liberalize by enlarging the classes of cases
in which damages are not regarded as an adequate remedy.  If the adequacy
of the damage remedy is uncertain, the combined effect of such other
factors as:
            uncertainty of terms ,  insecurity as to the agreed exchange
            and difficulty of enforcement should be considered.
      Modern approach is to compare remedies to determine which is more
effective in serving the ends of justice. Doubts should be resolved in
favor of the granting of specific performance or injunction.

1. Land-Sale Contracts.
      Rest2nd, p.360: Land-Sale Contracts. Because a particular parcel of
land has no exact counterpart elsewhere, money damages will not adequately
compensate P.  A decree of specific performance does not pose difficulties
of supervision, since it is easy for the court to verify whether D has made
a conveyance, and even to order that the conveyance be recorded without the
seller’s participation.  Specific performance will be ordered even where
the buyer has already contracted to resell the property.  In this situation
the court generally accept the buyer’s argument that if he is unable to
make the reconveyance, he himself will be liable for damages in an amount
which cannot accurately be determined without litigation.
      Breach by buyer: courts are also generally willing to order specific
performance of a land-sale contract where the seller has not yet conveyed,
and it is the buyer who breaches - court: value of land is speculative,
difficult for the seller to establish the difference between the contract
price and market price.  If the seller already conveyed,
damages will be an adequate remedy if the buyer refuses to pay the purchase
price; therefore, specific performance will not be ordered in this
situation.

2. Contracts involving personal services.
      Court will almost never order specific performances of K for personal
service.  But it will order Injunction - breaching employee from working
for a competitor.
      American Broadcasting Co. v. Wolf: It is action to specifically
enforce employment contract.  D entered into an employment contract with
ABC(P)., P agreed to enter into good faith negotiations during to 90-day
period preceding the contract’s termination regarding an extension period
and he agreed that for first half of this period he would not negotiate
with any other company and P was required to submit any offer accepted
during 90 day period to ABC allowing them to match that offer. 150 days
prior to the contract’s termination D entered into negotiations with CBS.
He agreed to CBS’s offer of employment, stipulating that this offer would
be kept open until the day following the first-refusal period.  D brought
suit against P seeking specific enforcement of its right of first refusal
and an injunction against D beginning employment with CBS.  Court denied,
App. Court Affirmed.  D appealed:
      Issue:  Will an employment contract be specifically enforced, after
its termination, through injunction, absent the need to prevent injury from
unfair competition or the existence of an express and valid anticompetitive
covenant.
      Holding:  Affirmed .
      No. D actions constituted a breach of the agreement to negotiate in
good faith, but not on the first refusal right, because the first refusal
right only applied to offers accepted during the designated period.  His
offer with CBS was negotiated prior to the effective period and accepted
after it expired.  Regardless, the breach of contract by D would not be
enforced by injunction.  Due to constitutional and policy considerations,
employment contracts will not be affirmatively enforced by the courts.
      However, negative injunctions are sometimes used to prevent the
employee from working for the competitor during the contract term.
      In this case, the contract term between D and P had expired at the
time D sought relief.
            Prof. agree with decenting opinion: a proper judgment would
grant a negative injunction on D’s employment for the 3 month first refusal
period.  Equitable remedies could be fashioned for professional services
contract.  J. Fuchsberg is right: D gave $100 to CBS to keep the offer
open.  We are talking here re binding K.  It is not a slavery (as
Majority’s opinion).
      Campell v. Baron:  Comedians was invited to perform  for 1 week, will
be paid $1000.  If she fail to appear at all - $1000 damage, fail to appear
first night - 1000 and last night - 1000.  Court would inforce it.  But she
has to be paid for whatever she worked: one day -$1000, 2 days - $2000,
etc.

                        SECTION 3.  AGREED REMEDIES.
            1. LIQUIDATED DAMAGES.
Liquidated damages provision - an agreement as to the consequences of
breach, placed in the contract itself.  When parties negotiating a K they
often make an agreement as to what each party’s remedy for breach of K
shall be.
      Single damage amount for multiple breaches: In many K each side makes
several covenants, of varying importance. Often, a liquidated damages
clause stipulates the same sum of money for breach of any covenant, whether
a trivial or important one; such a clause is sometimes called a “shotgun”
or “blunderbuss” clause.
      Trivial loss: If the actual breach is a non-material one,  courts
will decline to apply the liquidated damages clause.  More commonly, all
courts simply interprets the clause as having been intended by the parties
only to apply to material breaches.
      Major loss:  If  breach turns out to be a MAJOR one, the liquidated
amount is reasonable in light of the actual loss, court’s determination
vary: traditional view and modern view.
            Traditional view:  traditional approach judges reasonableness
only as of the time of contracting.  Courts will generally hold the
“blunderbuss” clause unenforceable.
            Modern view:  Courts will enforce the “blunderbuss” clause, on
the theory that however unreasonable the clause was as an estimate, it has
proved to be reasonable in light of actual damages.
            Actual loss much less than liquidated amount:  Both views will
lead to the “blunderbuss” clause being struck down in the actual loss is
significantly less than the liquidated amount.
      Lake River  Corp. v. Carborundum co:  Lake river contacts to perform
the service of bagging and re-shipping bulk owned by D.  K provides that  P
install at its own expense a new bagging system to do the work, and  D will
supply Ferro Carbo for bagging, at least 22,500 tons (to be bagged by P at
a stated rate per ton).  This system couldn’t be used for anything else, so
parties agree that if D supplies less than 22,500 ton during 3years K
period D will pay to P the per-ton bagging fee for the difference between
the quantity bagged and 22,500 ton.  During the K period the market for
Ferro Carbo drops and D stops shipping the material.  At the end of K
period (3 years) D shipped only 55% of the agreed minimum.  P sues D for
the difference: multiplying the per-ton bagging charge times the difference
between 22,500 ton and 12,000 ton (actually shipped).   D objects that the
damage clause is a penalty which is unenforceable.
      Held: for D.  The damage formula offered by P gives P dramatically
more than its lost profits from the breach.  P must be content with its
common-law damages: unpaid contract price minus the costs that P saved by
not having to complete the K.
            If the liquidated damages clause is struck down as a penalty, P
is not left without remedy.  Instead, he merely reverts to his common-law
damages, usually expectation damages.

2. QUASI-CONTRACTUAL RECOVERY BY A BREACHING PLAINTIFF.
      Britton v. Turner: P agreed to work for defendant for 1 full year,
for a salary of $120, the entire salary to be paid at the end of the 12
month period.  After about 9 ½ months the P quit his job and D refused to
pay him.  P sued in "quantum meruit" (as much as he deserves) for the value
of 9 ½ months wok and was awarded $95 by the jury, which prorated his
annual compensation.  D appeal.
Held: Affirmed.  Restitution can be claimed by the party in breach, but P
may recover only the benefit conferred upon D; this cannot exceed the pro-
rata contract price minus the damages from the breach. /This opinion was
wrong till Rest.2nd/
      Note:  "Willful default":  Many jurisdictions, defaulting P will be
allowed to recover in quasi-contract only is his breach is not willful.
But in employment contracts court are less likely to treat "willfulness" as
a bar to recovery, ex. In Britton the decision to quit was intentional.
Rest 2nd, § 174, Comment b: a party who intentionally furnishes services or
builds a building that is materially different from what he promised is
properly regarded as having acted officiously and not in part performance
of his promise and will be denied recovery on that ground even if his
performance was of some benefit to the other party.  But if the other party
agrees to accept - would not be denied.
      Some Jurisdiction follow Common Law, some - Rest.2nd.
      Under the Common Law:  12 months- $120,  9 ½  mon - $95, but if D
will not find someone to work for the rest 2 ½ mon  for $25 and will find
only for $50, P will receive $95-$25 =$70.
      Modern view: follow Restatement, no common law.

Rest 2nd, § 174:
1) If the party refuses to perform on the ground that his remaining duties
   of performance have been discharged by the other party’s breach, the
   party  in breach is entitled to restitution for any benefit that he has
   conferred by way of part performance or reliance in excess of the loss
   that he has caused by his own breach.
2) To the extent that, under the manifested assent of the parties, a
   party’s performance is to be retained in the case of breach, that party
   is not entitled to restitution if the value of the performance as
   liquidated damages is reasonable in the light of the anticipated or
   actual loss caused by the breach and the difficulties of proof of loss.
Comment (b):  see above for willful default.

Rest 2nd., p. 357:  Britton case was confirmed by this Rest.
Illustration: (3) A contracts to erect a building for B, who promises to
pay $10,000 on completion.  After spending 8,000 A stopped.  Uncompleted
building costs 7,000 as an addition to B’s property.  It will cost 4,000 to
complete the building, and B loses 500 because of delay.  A can get
judgment against B for 5500 -value of part performance less the harm caused
by the  breach.  A’s judgment will be unpaid K price less the cost of
completion and other additional harm to B, except that it must never exceed
the benefit actually received by B.

Chapter 2. KINDS OF PROMISES THE LAW WILL ENFORCE
General Rule:  To be a binding contract there must be:
      1) "mutual assent" (offer and acceptance)
       2) "consideration".
 Exceptions:  (contract which are enforceable even with no consideration)
     1- Contracts made under seal
     2- Promises which induce substantial reliance
     3- Promises to pay for benefits received

A promise is supported by consideration if:
1. Promisse gives up something of value (suffers legal detriment) (it can
   be non-economic, ex:  to circumscribe freedom of action)
   2. Promisor makes his promise as part of a bargain (in exchange for the
   promisee's giving)  A bargain may be present even if the promisor does
    not receive  any economic benefit from the transaction. (Hamer case)
                           CONSIDERATION - outline
I. CONSIDERATION
1. The Bargain element
     A. Promises to make gifts
     B. Sham and nominal consideration
     C. Promisee unaware - if reward promised for act, act was performed
        w/out knowing about reward - can’t recover
     D. Past consideration - no good -no consideration
2. The Detriment element
      A. Pre-existing duty rule
3. Illusory, alternative, implied promises.

II. PROMISES WITHOUT CONSIDERATION
      The general requirement is that a promise to be enforceable must be
supported by consideration.  But there is a number of situations in which
promises that are not supported by consideration are enforceable:
     1. Promises to pay debts (that have been discharged by bankruptcy, or
        that are no longer collectible b/c of the statute of limitations -
        are not enforceable in most states)
      2. Promises to pay benefits received - services w/out request  (often
in emergency situations)
      3. Other contracts:
     a) Modification of Sales Contracts - binding w/out consideration:
        changed price before shipment, no consideration, but the other
        party knows re new price.
     b) Option contracts - see case below
     c) Guarantees - enforced w/out consideration
     d) Promissory estoppel.
        SECTION 2.  CONTRACT AS A BARGAIN:THE REQUIREMENT OF CONSIDERATION

      PROMISE TO MAKE A GIFT.
      Generally unenforceable, because it lacks the bargain element.  But
if the promisor imposes a condition, and occurrence of this condition is of
benefit to him, then the bargain element will be possibly present.
Example: Hamer v. Sideway

Hamer v. Sidway:  Uncle William promised to give young Willie, his nephew,
the sum of $5,000 If he would refrain from smoking, drinking and gambling
until he was 21 (he was 15).  Willie did abstain (kept the promise).
      Held:  Uncle's promise was "bargained for"  and therefore supported by
consideration.  While the uncle may have derived no actual economic benefit
form his nephew's abstinence, he was trying to obtain something he regarded
as desirable (his nephew's health) and was therefore bargaining

      NOMINAL CONSIDERATION.
      Even though a deal looks on its face as if it is supported by
consideration, the Court may conclude that this consideration is nominal
and thus No consideration at all.
And No Contract, because No Consideration.  Exampel: Schnell v. Nell
Schneel v. Nell:
Rest. 1,  ( 84, p.211:  Illustrated that inadequacy of consideration does
not vitale an agreement.

Rest. 2nd  ( 72:
(4) & (5): Illustrate that a false or mere pretense agreement is no
consideration for a promise.

(2): Bargain - a performance of return promise is bargained for if it is
sought by the promisor in exchange for his promise and is given by the
promisee in exchange for that promise.

Comm.D: Sham and nominal consideration - Example: A says that give B $1000.
 They made a K, under which B must give $1 to A.  A’s promise is
unenforceable.  It is not real agreement.  Only in words.

Comm.C: Promises involve mixture of bargain and gift - A promises to sell
B’s car for less than market value of the car.  The promise is “bargained
for”.  As long as the promise is partially induced by a bargaining motive,
the fact of gift making and or  friendship doesn’t mean that  no
consideration.
Newman & Snell's State Bank v. Hunter:
Rest.2nd (87
SECTION 3. RELIANCE ON A PROMISE AS A BASIS FOR  ENFORCEMENT
Rest. 2nd ( 90, p. 226
          PROMISSORY ESTOPPEL- promise binding w/out consideration
      Promissory estoppel is one of the promisses which foreseeably induce
reliance on the part of the promise, will often be enforcealbe without
consideration.

      Actual reliance - promisee must actually rely on the promise.( A
promises to pay for B’s college if B attends a school full time.  B gave up
his job, A refuses to pay.)  B must show that he would not have quit his
job and go to college in would not actually rely on the A’s promise.

      Foresseable reliance - promisee’s reliance must be foreseeable to
promisor.  War in the case - is not foreseeable.
      Possible applications of Promissory Estoppel:
     1. Promise to make a gift
     2. Charitable subscriptions (if oral promise -charity must rely on it,
        if in writing - no reliance required)
     3. Offers by sub-contractors
     4. Gratuitous bailments and agencies (A promise to collect mail while
        B is out).  Promisor will be liable if he does not perform at all.
     5. Promise of job. (Revoke of the offer before employee shows up.)
     6. Negotiations in good faith.  Remedy - if bad faith is found. (A
        promised to negotiate lease for the space with B, B rejects an
        offer from another owner.  A leases the space to B’s competitor.)

      Damages - to prevent injustice  RELIANCE damages, not expectation.
Feinberg v. Pfeiffer Co

SECTION 4. PROMISES AS CONSIDERATION: THE PROBLEM OF MUTUALITY
                       Wood v. Lucy, Lady Duff-Gordon:
               SECTION 5. PRE-EXISTING DUTY AS CONSIDERATION:
              MODIFICATION AND DISCHARGE OF CONTRACTUAL DUTIES
      Pre-existing duty  - if a party does or promises to do what he is
already legally obligated to do, or if he forbears or promises to forbear
from doing something which he is not legally entitled to do, he has not
incurred the kind of “detriment” necessary for his performance or
forbearance to constitute consideration.
      Pre-existing duty rule has much exceptions and limitations.

Bloor v. Fastatff Brewing Corp.
Pre-Existing Duty.

Agreements to accept part payment of debt in satisfaction of whole: A
common subcategory of the pre-existing duty rule involves a creditor’s
agreement to accept a payment by his debtor of a lesser sum in satisfaction
of the full debt.  Since the debtor owes a full amount, he is not by paying
a partial amount doing anything that he was not already legally obligated
to do.  Therefore, some courts hold  (often called the rule of Foakes v.
Beer- “pre-existing duty rule”)  that the creditor’s promise not to require
payment of the full amount is not binding, for lack of consideration.  This
creditor’s promise to allow the debtor extra time to pay is also not
binding, for lack of consideration.
Foakes v. Beer:  P obtains a judgment for 2,000.  The parties agree that P
will accept in full satisfaction of this judgment 500 in cash and the rest
in installments.  D fully complies with  it, and the amount of judgment was
paid off.  P then brings suit for interest on the part of the judgment that
was paid off in installments.  D claims that the payment plan agreed to by
P constituted a discharge of any obligation by D to pay interest.
      Held: such an extended payment plan cannot constitute consideration
for a promise of discharge, since D only promised what he was already
obligated to do.  D doesn’t have to pay interest, because was no additional
consideration.
      Notes:
In most jurisdiction this rule has bee stripped: it applies only when the
debtor makes part payment of an amount that is indisputably due, and due on
the date that the part payment is made.  If, in addition to making part
payment, the debtor does any of the following, he has given consideration
for the discharge of the larger amount:
      a) debtor gives security in addition to the part payment
   b) he refrains from the bankruptcy or insolvency
   c) arrange for composition agreement in which several creditors agree to
   take less than the full amount
   c) he pays past of a claim the full amount of which is in bona fide
   dispute
      A few jurisdictions have ceased to follow the rule of Foakes v. Bear
and allow a creditor’s promise to forgive part of a debt to be enforced
where the debtor makes payment of the remainder.
      Under the UCC Code this rule doesn’t apply, because contracts for the
sale of goods may be enforceably modified without consideration.  When
creditor agrees to take a partial payment in discharge of the full debt, he
presumably has “modified” the contract.

      Calif. Civil Code ( 1524, p. 289:  Part performance of an obligation,
either before or after a breach thereof, when expressly accepted by the
creditor in writing, in satisfaction, or rendered in pursuance of an
agreement in writing for that purpose, though without any new
consideration, extinguishes the obligation.

Excusable Non-Performance Under the Common Law.
Blakeslee v. Brd of Water Commres: P entered into a contract with  D to
build a large dam.  The contract fixed the price for the construction and
time for completion of the work in 33 months w/ liquidated damages  of $100
for each day required the stipulated time.   Nobody could think that US
would be involved in the war.  P contented that performance of the K
according to its terms impossible.  D agreed to waive the penalty for
failure to complete on time and to extent the time if P would finish the
work.  D asserted that it could not change the compensation called for in
the K, unless existing legislation were changed.
      P completed the work and effected the necessary changes in
legislation, but D refused to pay any amount above that stipulated in the
terms of K.  P filed the complaint saying that the prior K was rescinded by
the waiving of penalties already incurred, that new terms constituted a new
K.  D: no consideration was given for new terms.  Lower court agreed with
D.  P appeals.
      Held: Where a K is confronted with circumstances not contemplated
when the K was made, which render its performance impossible or unduly
onerous, and the promisor, knowing of the situation, induces him by a
promise of additional compensation to proceed, the contractor’s right to
that compensation be recognized.  The unforeseen difficulties and burdens
must be substantial, unforeseen, and not within the contemplation of the
parties when the K was made.

“Right to breach”.
Courts have 2 different views on pre-existing duty rule:
1. Try to avoid application of this rule by reasoning that contracting
   party always has the right to breach his K and pay damages; therefore if
   the party continues with his performance, he has given up his right to
   breach, and thereby conferred consideration on the other party.
2. Majority of courts have rejected the (1) rationale, on the grounds that
   one does not have a “right” to breach the K; damages for breach of K are
   simply compensation to an injured victim.

      DeCicco v. Schweizer:  This case is variant of the “forbearing of the
right to breach as consideration” theory.  D contracted with his daughter’s
fiance shortly before the wedding, promising to pay $2500 a year to the
couple following their marriage.  D stopped making the payments after the
first ten.
      Held: Agreement was supported by consideration, notwithstanding the
D’s argument that since his then-prospective son-in-law was already
engaged, and therefore bound to go through with the wedding, his doing so
was not consideration.  The court found that there was consideration in the
form of the fiance’s not inducing the D’s daughter to join with him in
calling off (mutually rescinding) the engagement, which the couple could
legally have done.

            SECTION 6. “PAST” CONSIDERATION AND MORAL OBLIGATION.
Past Consideration.
Pre-existing debt: A sub-category of the rule that “past consideration”
does not constitute consideration “ relates to situations in which the
promisor promises to pay a pre-existing debt.
General requirements that a promise to be enforceable must be supported by
consideration.
      There are number of situations in which promises that are not
supported by consideration are nonetheless enforceable:
1. Promises to pay past debts - there are not longer legally enforceable.
2. Promise to pay for benefits received.
                    Promise To Pay For Benefits Received.
               Benefits previously received but not requested.
If A renders a service to B w/out having been requested to do so, and B
then promises to pay for it, most courts hold that B’s promise is
unenforceable.
      Harrington v. Taylor: D assaults his wife, who then takes refuge in
P’s house.  D gains entrance and begins another assault on his wife.  D’s
wife knocks D down and is at the point of cutting his head open or
decapitating him with an axe when P intervenes.  The axe strikes P as it is
descending and mutilates P’s hand badly, but D’s life is saved.  Later, D
orally promises to compensate P for his injuries, but soon reneges on the
promise.
      Held: for D.  A past humanitarian act is not lawful consideration and
D’s promise is unenforceable.  See also Mills v. Wyman.
      Promise to pay for past services received.  Usually held to be
supported by consideration.
Mills v. Wyman: : D’s son, a 25-years old, becomes ill while traveling, and
is nursed by P.   D writes to P, promising to pay P’s expenses.
      Held: D’s promise was not supported by consideration, since P’s
services were not given at D’s request.  Also, since the son had long since
left home, his own request for assistance should not be imputed to his
father.  If son is minor - court would probably have held the promise
binding.

Possibly binding w/out consideration.
Situations, in which such promises to pay for past benefits are enforceable
without consideration.  Minority held that a subsequent promise to pay for
unrequested services is enforceable, if the recipient has incurred a
substantial benefit from those services.
      Webb v. Mcgowin:  A saves B’s life in an emergency, and is totally
disabled in so doing.  B then promises to pay A $15.00 every two weeks for
the rest of A’s life, and makes these payments regularly for over eight
years until he dies.  The estate then refuses to continue the payments and
A sues on the promise.
      Held: B’s promise is enforceable, even without consideration, b/c B
incurred a substantial material benefit from A’s act, even though B did not
request the act.

              Chapter 3. INTENTION, INTERPRETATION, IMPLICATION
                           AND RELATED MYSTERIES.
For a contract to be performed the parties must reach an agreement to which
they  “mutually assent”- offer and acceptance.  Each party must act in such
a way as to lead the other to reasonably believe that an agreement has been
reached.  Only the parties act, not their subjective thoughts - their
minds.
      Mutual assent doesn’t mean that the party must agree on all the terms
of contract, they must agree on the major or essential terms.    Parties
must, dispite the minor disagreements,  intend to have a contract.

      Objective theory of contracts - A party’s intentions are to be gauged
objectively, rather than subjectively.  Objective test for a party’s
intention is that party intended what a reasonable person in the position
of the other party would conclude that his objective manifestations of
intent meant.  Example: A said to B that he will sell him house for $1000,
and then didn’t do it.  If B either knew, or should have known, that A was
joking, there is no mutual assent and no contract.  But if B could believe
that A is going to sell him - A breached the K.
      Secret intent.  Party’s secret intentions (secret from the other
party) are irrelevant in determining whether a K exists, and what its terms
are.

      Embry v. Hargadine, McKittrick Dry Goods Co.:  Employee, a sales
manager for Employer, tells Employer that unless Employee’s K is
immediately renewed for anther year, he will immediately quit.  Employer
replies, “Go ahead, you are all right.  Get your men out and don’t let that
worry you”.  Employee., thinking that his K has been renewed, makes no
effort to find employment elsewhere. 2 months later his job is terminated
in an economy move, and he sues Employer.  Employer saying that if he did
remarks, he didn’t do so with the intent to create a K.
      Held: Employer’s undisclosed intent not to enter a K was immaterial.
Whatever Employer’s intent, if “what Employer said would have been taken by
a reasonable man to be an employment, and Employee so understood it, it
constituted a valid K.”

      Whitter, The Restatement and Mutual Assent -p.337
New doctrine which was adopted: one who did not actually assent to the K
may be held to it if he carelessly led the other party to reasonably think
that there was assent -this may well be doubted, b/c the liability for
careless misleading can be held in tort.
      Why not say that actual assent communicated is the basis of “mutual
assent” except where there is careless misleading which induces a
reasonable belief in assent?

Tolmie v. United Parcel Service, Inc.:  P was employee of UPS.  When he
first came to work the terms of his employment were governed by an
agreement that allowed dismissal only for cause.  When he received
promotion, he realized that this agreement will be invalid and he voiced
this concern to his supervisor.  The supervisor assured him that he would
have nothing to worry about, insofar as job security was concerned, b/c it
is harder to fire management than other employees’ of  UPS.  P accepted
promotion then and was thereafter terminated for reasons which would not
constitute good cause.
      Held: the supervisor’s response cannot support P’s cause of action.
The statement was vague, not clear and definite, and would not cause a
reasonable employee to believe that an offer had been made.  The offer must
encompass terms that are clear and definite.

Ricketts v. Pennsylvania R. Co.:  P was a dining car waiter, sued for
injuries.  Defense that P signed a release for $750, 1/10 of the amount
awarded by a jury.   P was unable to read (injured) and signed b/c his
attorney said to him that it was a receipt  for lost wages, and that he
hired attorney to make a lost wages claim, not  to sue his employer.
      Held: Affirmed judgment against employer.
      Discussing 2 theories: meeting of the minds of “will” theory and
“objective” theory.

Misunderstanding.
To form a K, there must be a “meeting of the minds”, both parties must be
agreeing to a deal.

Assertion of a Mutual Mistake.
Konic International v. Spokane Computer Services, Inc.:  D instructed
employee (Y) to investigate the possibility of purchasing a surge
protector.  When Y contacted P salesmen quoted a price “fifty six twenty”.
The salesmen meant the price $5,620.  Y prepared a purchase order for
$56.20, approved it, and requested delivery.  Protector was received,
installed.  When President of D returned from vacation he asked to remove
it, b/c realized that the price for it more than $56.20.  President
contacted P and told that Y has no authority to order such equipment, that
President didn’t wan this equipment, and P should remove it.  P refused
uninstall, D refused to pay.  P filed a suit.
      Held: There is no manifestation of mutual assent to an exchange if
the parties attach materially different meanings to their manifestations
and neither knows or has reason to know the meaning attached by the other.
There is a failure of communication between the parties, both attributed
different meaning to the same term.  Because the “fifty six twenty”
designation was a material term expressed in an ambiguous form to which two
meanings were obviously applied, no contract between the parties was ever
formed.  Even if no K, restitution in this kind of cases may be required if
one party has been unjustify  enriched.  However, no remedy in this case.

      Restatement 2nd, § 20:  Even though the parties manifest mutual
assent to the same words of agreement, there may be no K b/c of a material
difference of understanding as to the terms of the exchange.
   1) If misunderstanding concerns a material term, and neither party knows
      or has reason to know of the misunderstanding, there is no contract.
      “There is no manifestation of mutual assent to an exchange if the
      parties attach materially different meanings to their manifestation
      and (a) both know or has reason to know the meaning attach by the
      other or (b) each party knows or has reason to know the meaning
      attached by the other”;
   2) The manifestation of the parties are operative in accordance with the
      meaning attached to them by one of the parties if (a) that party
      doesn’t know of any different  meaning attached by the other, and the
      other knows meaning attached by the first;  (b) that party has no
      reason to know of any different meaning attached by the other, and the
      other has reason to know the meaning attached by the first.

Ambiguity - Ambiguous term - the one, which has two inconsistent meanings.
   See Illustration below.
      Illustrations: A offers to sell B goods shipped by steamer
“Peerless”, there 2 ships with the same name..
1. Both intend the same Peerless - there is a K.  It is immaterial whether
   they know that two ships has the same name.
2. A means Peerless # 1, B - #2.  If neither A or B or both know(has reason
   to know) that they mean different ships - no K.
3. A knows that B means # 2 and B does not know that there are 2 ships
   w/same name.  There is a K for the sale from # 2. Immaterial whether B
   has reason to know that A means # 1.  Conversely if B knows that A means
   # 1…  But the K may be voidable for misrepresentation.
4. Neither party knows that there are 2 ships Peerless.   A has reason to
   know that B means #2 and B has no reason to know that A means # 1.  There
   is a K for sale of goods from # 2.  Conversely, if B has… that A means #
   1 and A has no… B means # 2, there is a K for sale from # 1.   In either
   case K may be voidable for mistake.

Alternative view to Restatement -Professor’s view.  If neither party is at
fault, or both are equally at fault, some court hold that a K has been
formed, but allow either party to avoid it to be excused from performing -
virtually it would be the same that no K was formed.
If one party knows or should know of the ambiguity, almost all courts share
the Restatement view that a K is formed on the innocent party’s terms.
Frigaliment Importing Co. v. B.N.S. International Sales Corp.:  A agrees to
sell and B to buy a quantity of  “chicken”.  A delivers “stewing” chicken
or “fowl”.  B rejects the shipment on the grounds that the K calls for
“broilers” or “fryers”.  B sues for damages.
      Held: both parties acted in good faith, and neither had reason toknow
of the difference in meanings of the word “chicken”.  The misunderstanding
went to a vitally important term of the K.  Therefore, B’s claim for breach
of K fails.
      Court doesn’t specify if there was a K formed.

Restatement 2nd, § 201:  Prof. doesn’t agree w/ Rest.  Rest. Illustrate
Frigaliment case and implying that “it is found that each acted in good
faith and that neither had reason to know of the difference in meaning.
Both claims fail”.  The misunderstanding meant there was a lack of mutual
assent, and thus no contract.

U.S. Naval Institute v. Charter Communications:   P is a small publisher,
no experience in publication of bestsellers, but in the publishing business
for 100 years. P and D entered into the K granting paperback publication
rights to D, but P objected to D’s distribution and sales before the
contractual publication date.
      Held: Where a party is engaged in a particular trade, it is presumed
to have knowledge usages in that trade.  Judgment in favor of P.  The
decision of trial court was reversed, b/c the court didn’t follow from P’s
constructive knowledge of industry custom permitting early shipping that P
intented to permit pre-October sale.  D must be deemed to have had
constructive knowledge that P intended that there not be sales of the
paperback edition during the one-year period in which the hardcover edition
would normally be the only edition.

      Restatement 2nd, §202 - p.362:  (1) Words and other conduct are
interpreted in the light of all the circumstances, and if the principal
purpose of the parties is ascertainable it is given great weight.
      Illustration.
(11) A contract for the sale of horsemeat scraps calls for minimum 50%
protein.  As both parties know, by a usage of the business in which they
are engaged, 49,5% is treated as the equivalent of 50%.  The K is to be
interpreted in accordance with the usage.

                      Chapter 4.  OFFER AND ACCEPTANCE.
THE LAW OFFER AND ACCEPTANCE - P.P.431-456
A. Terminology:
Offeror-offeree, promisor - promisee,
To revoke -withdraw the offer before it is accepted;
To reject to offer - offeree refused to enter into the deal.
Counteroffer -statement by the offeree suggesting substitute terms.
B. Duration of an Offer
(1) Rejection -unequivocal rejection terminates the power of acceptance.
Rejection normally terminates an offer  and may also protect the offeree,
who may thereafter reopen negotiations. Restatement 2nd §38
Counteroffer is a rejection of  the offer, and thus has the same effect as
a rejection on the duration of the offer.  Difference between an outright
rejection and a counteroffer: counteroffer is itself an offer that is
capable of being accepted by the original offeror; it carries on
negotiations rather than breaking them off. Rest.2nd, § 39, 59.
Conditional Acceptances - many communications that appear at first blush to
impose new conditions may be acceptances rather than counteroffers, it
depends on whether a condition adds a new term.

(3) Lapse of time - Where the offer does not specify a time period for its
existence, the offer expires at the end of a “reasonable time”  Res.2nd,
§41(1): what is reasonable depends of the circumstances- nature of the K,
the communications of the parties; prior course of dealing.
(4) Death of incapacity of offeror - offeree’s power of acceptance is
terminated upon the death or incapacity of the offeror.  Rest.2nd, §120:
until notice of a depositor’s death, a bank has authority to pay checks
drawn by him or by agents authorized before death; until notice of the
death of the holder of a check deposited for collection, the bank have
authority to process it.

To whom an offer is addressed - an offeror may exclusively determine the
person or persons in whom a power of acceptance created.
D. What constitutes a revocation - a revocation must be a clear
manifestation of unwillingness to enter into the proposed bargain.  The
words are not required, e.g. property previously offered for sale to the
offeree has been disposed of to a third person.
E. Indirect revocation - P learned through W that D had changed his mind
about selling the property to P.
F. Communication to Third person - Written revocation, rejection or
acceptance is received when it “comes into the possession of the person
addressed, or of some person authorized by him to receive it for him, or
when it is deposited in some place which he has authorized and the place
for this or similar communications to be deposited for him.
Manner of Signifying Acceptance - acceptance must comply with the precise
requirements of the offer, since the offeror is the “master of his offer”
and can specify what actions constitute an effective acceptance.

When is a Communication Effective? Herein of the “Mailbox Rule” and other
mysteries - the absence of an express specification by the offeror, an
accepatance is effective when it is put into the mail (or put out of the
offree’s possession) while all other communications - offers,
counteroffers, revocations, etc. - are effective only when received.
      Revocation Crossing an Acceptance - the mail box rule is not limited
to the postal service but applies generally to all forms of non-
instantaneous communication.  If after mailing the acceptance the offree
changes position in reliance on the existence of a K since he will assome
the offeror still desires the transaction, the mail box rule protects this
reliance.  If the offeror  in fact does change his mind and wishes to be
sure that the revocation is effective, he must use an instantaneous means
of communication to verify that the offeree has not accepted in the
meantime.   Revocation is ineffective if it is communicated after an
acceptance has been mailed.
      The Lost or Delayed Acceptance - the offeror should normally expect a
reply one way or the other; if one fails to arrive he may normally use an
instantaneous method of communication to ask “what did you decide to do?”.
      The Overtaking Rejection - the acceptance is effective even though
the offeror learns of the rejection before he learns of the acceptance.
Since the acceptance is effective when it is mailed, an overtaking
rejection is referred to in the Rest.2nd as a “revocation of acceptance”
rather than as a “rejection”.
      A Rejection Followed by the Mailing of an Acceptance - The Rest.2nd
abandons the mail box rule and provides that a K exists only if the offeror
receives the acceptance before he receives the rejection.
      Other Situations - A offers to insure B’s house against fire, the
insurance to take effect upon actual payment of the premium, and invites B
to reply by mailing his check. While B’s letter is in transit, the house
burns.  The loss is within the period of insurance coverage.

When is a Communication Effective- when Mailbox Rule is not applicable - in
considering the mail box rule for acceptance, important to recognize when
the rule is, or may not be applicable.
      Specification by the Offeror - the mailbox rule may be varied or
rejected by the offeror’s specification of the manner of acceptance.
Offeror is the “master of his offer” and may specify how and when assent
must be communicated.
      Use of an Improper Medium of Transmission - mailbox rule is
applicable only if a reasonable means of communication is adopted by the
offeree.  Adopting means at least as rapid and reliable a means of
communication as that chosen by the offeror -a mail response to a mail
offer, a telegraph response to a telegraph offer.  Rest 2nd, §67: a
communication sent by an improper medium of transmission is nevertheless
effective on dispatch if it is received no later than the time
transmissio9n by a proper medium would have been received.
      Messages that are not Properly Dispatched - mailbox rule is not
applicable to acceptances that are not properly addressed, on which proper
postage ins not affixed,  so forth.
      Messages Delivered by an Agent of the Sender - A makes B an offer by
mail, or messenger, and B promptly sends an acceptance by his own employee.
 No K until the acceptance is received by the offeror.

J. Crossing communication - when identical offers cross in the mail - as a
result no K is formed.

4-1.  THE OFFER
Nebraska Seed Co. v. Harsh:  D, a farmer, mailed to P, a Corp. engaged in
buying and selling seed, the letter:
       “I have about 1800 of millet seed of which I am mailing a sample.
      This millet is recleaned and was grown on sod and is good seed.  I
      want $2.25 per cwt. for this seed.”
P telegraphed on the same day:
      “Sample and letter received.  Accept your offer.  Millet like sample
      225 per hundred.  Wire how soon can load”.
D refused to deliver the seed.
      Held: No contract existed.  A letter cannot be construed into an
offer.  He doesn’t  say: I offer it to you.  Letter shows that it was not
intended as a final proposition.  It did not fix a time for delivery.  The
correspondence don’t make a complete K.  If it would be a K,  a Party sends
out letters to a number of dealers would subject him to a suit by each one
receiving a letter.

Advertisements as offers: Most ads are not offers, b/c they do not contain
sufficient words of commitment to sell.
       This ad has “Out they go Sat… first come, first served” that made a
specific promise:
Lefkkowitz v. Great Minn Store:  D published the ad in newspaper: “Sat 9am
2 brand new pastel mink 30skin scargs selling for $89.50 Out they go Sat.
Each..$1.00 1 black lapin stole beautiful, worth $139.50…$1.00.  First come
first served.  P was the first to present himself on Sat and demanded the
Lapin Stole for one dollar.  D refused to sell b/c of a “house rule” that
the offer was intended for women only.  P sued D and was awarded $138.50 as
damages.  D appealed.
      Held: Have to apply the test “whether the facts show that some
performance was promised in positive terms in return for something
requested”  Where an offer is clear, definite and explicit, and leaves
nothing open for negotiation, it constitutes an offer such that acceptance
of it will create a K.  The D’s ad was such an offer.  As to the alleged
“house rule”, while an advertiser has the right at any time before
acceptance to modify his offer, he does not have the right to impose new
condition after an acceptance.

Steinberg v. Chicago Medical School: Bulletin of D: “Students are selected
on the basis of scholarship, charactr, and motivation without regard to
race, creed, sex.   The student’s potential for the study of med will be
evaluated on the basis of academic achievement, MCAT results, personal
appraisals by a committee, and the personal interview, if requested by the
Committee.”  P applied for admission, paying $15 and was rejected. P filed
a class action claiming that the school used nonacademic criteria in
rejecting his application.
      Held: the description containing the terms under which an application
will be appraised constituted an invitation for an offer.  It was an offer
to apply. Acceptance of the application and fee constituted acceptance of
an offer to apply under the criteria D had established.
4-2. REVOCATION, REJECTION, AND COUNTEROFFER
This case is an exception to the rule that an offer to a third person, when
learned about by the original offeree, does not constitute a revocation of
the offer to the latter.
Dickinson v. Dodds: D gave P a writing that stated that the former agreed
to sell his land and building upon it to the P for $800, the offer to be
left open till 6/12, 9am.  P decided to accept on 6/11, but didn’t
immediately convey his acceptance believing he had till next morning.  That
afternoon, one Berry informed P that D had decided to sell the property to
A.(co-def).  On 6.12 P attempted to give a copy of the acceptance to D who
said it was too late.
       The offeree learned from his agent, one Berry, that the offeror  had
been offering or agreeing to sell the land in question to a third person.
      Held: The writing was not an agreement to sell, but an offer.   Both
parties had not yet agreed to go through with the deal.  No consideration
given for the promise, the promise was not binding so D was free to do
whatever he wanted before receiving the acceptance.  P knew that d had
changed his mind.  There was no meeting of the minds between the parties
and no contract.  The receipt of this knowledge by the original offeree
constituted a revocation of the offer to him.   Most courts probably
wouldn’t follow this holding, but if this case would stand for the
proposition that when one learns of an actual K to sell the property to
someone else, there is a revocation, then nearly all courts would agree.

James Baird Co. v. Gimbel Bros., Inc:  D offered to supply linoleum to
various contractors who were bidding (called) on a public construction
contract.  P relying on D quoted prices submitted a bid (offer) and later
the same day received a telegraphed message from D that its quoted prices
were in error.  P’s bid was accepted.  D’s offer had “if successful in
being awarded this contract”.  P received his bid on the 30th , but D’s
written confirmation of the error on 31st but sent an acceptance despite
this 2 days later.  D refused to recognize a K.
      Rule: the doctrine of promissory estoppel shall not be applied in
cases where there is an offer for exchange as the offer is not intended to
become a promise until a consideration is received.
      Held:  Looking at the words “if successful…” shows D’s intent of not
being bound simply by a contractor relying or acting upon the quoted price.
 This is reinforced by the phrase “promt acceptance after the general K has
been awarded”.  No award had been made at the time and reliance on the
prices cannot be said to be an award of the contract.
      An offer for an exchange, either being an act or another promise, is
not mean to become a promise until a consideration is received.  Here, the
linoleum was to be delivered for the contractor’s acceptance, not his bid.
An option contract has not arisen as it is clear from the language of the
offer that D had no intention of assuming a one-sided obligation.

4-3. ACCEPTANCE BY PERFORMANCE OR PROMISE.
Preparations to perform may constitute justifiable reliance sufficient to
make the offeror’s promise temporarily irrevocable under Rest. 2nd ,
§87(2).
Petterson v. Pattberg: D holds a mortgage on P’s property.  D offers to
give P $780 reduction in the amount of the principal if P will pay off the
mortgage before the end of May.  In late May p told D “I have come to pay
off the mortgage”.  D replies that he has sold the mortgage.  P shows that
he has enough cash to pay the principal less the $780 , but D refuses to
take it.   P (who has contacted to convey the property free and clear to
someone else) is then required to pay the full principal amount of the
mortgage to the person who bought it from D.  P sues D claiming that he
accepted an open offer for the $780 reduction.
      Held: for Defendant.  The only act requested by D’s offer was the
actual tender of payment.  Until that tender, D was free to revoke his
offer.  Since D revoked before P made the actual tender, there was no
contract.
      Rule: An offer to enter into a unilateral contract may be withdrawn
at any time prior to performance of the act requested to be done.
      Dissent: Until the act requested was performed, D had the right to
revoke his offer. However, he could not revoke if after P had offered  to
make the payment.
      Note: other facts which do not appear in the opinion may have
influenced the court: P received the letter telling him re revocation of
the offer.

4-4.  PRECONTRACTUAL LIABILITY.  Promisory Estoppel.
      Promissory Estoppel- a promise which the promisor should reasonably
expect to induce action or forbearance on the part of the promisee or a
third person and which does induce such action or forbearance is binding if
injustice can be avoided only by enforcement of the promise.  The promisee
must actually rely on the promise and his reliance must be reasonably
foreseeable.
      Possible applications: promise to make a gift, charitable
subscriptions, gratuitous bailments and agencies, offers by sub-
contractors, promise of job and negotiations in good faith.
      A person who negotiates with another may be found to have a duty to
bargain in good faith; if bad faith is found, the court may use P.E. to
furnish a remedy.( A offered a space for rent to B, B refused from another
offer, but A offered it to other person.  Court might apply P.E., holding
that A implicitly promised to use good faith in the negotiations and
breached that promise.
      Promise of franchise: The use of P.E. to protect negotiating parties
is especially likely where the promise is a promise by a national
corporation to award a franchise to the other party.
      Liability in the franchise-negotiation situation may exist under a
promissory estoppel theory even though the K contemplated by the parties
(but never entered into) would have been enforcealbe.  P.E. is not always a
substitute for consideration, it does not necessarily enable the court to
find an enforceable K.  Instead, it is sometimes a separate remedy that
contains elements of K, quasi -K, and tort.  This is illustrated by
      Hoffman v. Red Owl Stores:  P negotiates with D Corp. to become a
supermarket franchisee of D corp.  D assures P that if he raises $18,000
worth of capital and does certain other things, he will be given the
franchise.  P sells his bakery, purchases and then resells grocery store to
gain experience, makes a payment on the site of the proposed store, moves
his residence to a location near, and borrows $18,000 from his father-law.
D decides that as long as the $18,000 is merely on loan to P, his credit
standing is not good enough, and tells to P that deal is off unless P get a
letter that money is not a loan, but gift.  P refuses and sues.
      Held:  P may recover for all expenses and losses he suffered in
reliance of D’s promise.  The P.E. doctrine applies even though at the time
of suit the negotiations between the parties were highly indefinite; no
agreement had been reached as to such items as “the size, cost, desigh and
layout of the store building, terms of the lease for rent, maintenance,
renewal, and purchase options”.  Thus the jparties had not finalized the
details of their proposed bargain sufficiently enough even to constitute an
offer, let alone a contract.  Nonetheless, P.E. recovery is awarded on t he
grounds that such recovery is not “equivalent of a breach of contract
action”.

             Chapter 5. MISTAKE, IMPOSSIBILITY, AND FRUSTRATION.
A  mistake is a belief that is not in accord with the facts.
1. Mutual mistake - if both parties have the same mistaken belief.
2. Unilateral - by contrast, if only one party has the mistaken belief
   (more difficult to avoid K that in the mutual).
3. Existing fact -  the doctrines applicable to mistake apply only to a
   mistaken belief about an existing fact, not an erroneous belief about
   what will happen in the future.
4. Mistake of law - mistake about a legal principle - as per most courts
   -can’t be a mistake.

   5-1. Mutual Mistake.
   3 requirements to be satisfied in order for adversely-affected party may
   avoid the K on account of mutual mistake:
     1) Basic assumption.  The mistake must concern a basic assumption on
        which the K was made.  See Smith v. Zimbalist.
     2) Material effect. The mistake must have a material effect on the
        “agreed exchange of performances”; and
     3) Risk.  The adversely-affected party ( who want to avoid K) must not
        bear the risk of the mistake.
Special contexts:
     1) Market conditions - will generally not be “basic” ones, so the
        mistaken party will not be able to avoid the K.
     2) Existence of subject matter:  usually “basic assumption”, so K
        could be avoid.
     3) Quality of subject matter: often a “basic” assumption, so K could
        be avoid. See Smith v. Zimbalist and Sherwood v. Walker.
     4) Minerals in land: in land-sale Ks, the Seller will almost always
        bear the risk that valuable oil and gas deposits will be found on
        the land.  Seller cannot avoid the K when discovery is made.
     5) Building conditions: builder will almost always b e found to bear
        the risk of a mistake about soil or other unexpected conditions, so
        he can’t avoid K if construction proves much more difficult than
        expected.

      Sherwood v. Walker: Seller agrees to sell Buyer a cow, which both
      parties believe to be barren.  The K price is approximately $80.
      Prior to delivery of the cow, Seller relaizes that she is pregnant,
      and refuses to deliver her.  He value as a breeding cow is at least
      $750.
            Held:  Seller may rescind (revoke) the K.  A party may avoid a K
      if “ the thing actually delivered or received is different in
      substance from the thing bargained for, and intended to be sold.”
      Here, the mistake went “to the very nature of the thing.  A barren cow
      is substantially a different creature than a breeding one.”

      Replevin: At common law the action of replevin was available to P
      claiming to be the owner of personal property, and seeking its return
      from one who had wrongully taken or who was wrongfully holding it.

      Smith v. Zimbalist:  P is an elderly collector of rare violins.  D is
      famous violinist and violin collector.  D buys 2 violins from P’s
      collection.  Both parties believe that one violin is a rare
      Stradivarius and the other-rare Guarnerius.  The K sets price of
      $8,000 for 2 violins.  It turns out that both violins are mere
      imitations.  D sues for rescission, and presents evidence that each
      violin is worth at most $300.
            Held:  D is excused from paying $6,000 he still owes on the
      $8,000 K price.  Court applied a warranty theory rather than mistake
      doctrine, but modern mistake analysis would support the same result.

      Rest.2nd, §551:
     1. One who fails to disclose to another a fact that he knows may
        justifiably induce the other to act or refrain from acting in a
        business transaction is subject to the same liability to the other
        as though he had represented the nonexistence of the matter that he
        has failed to disclose, if, but only if, he is under a duty to the
        other to disclose the matter in question.
     2. One party to a business transaction is under a duty to exercise
        reasonable care to disclose to the other before the transaction:
        (a) matters known to him that the other entitled to know, b/c of
        fiduciary or other similar relation of trust and confidence between
        them; (2) facts basic to the transaction, if he knows that the
        other is about to enter under a mistake, and b/c of relationship he
        would reasonably expect a disclosure of those facts.
            Illustration: A -violin expert, finds a violin in 2nd hand
store and knows that it is a genuine Stradivarius and worth $50,000.
Violin on sale for $100. He buys w/out disclosing his knowledge.  A is not
liable to B.
            B sells musical instruments in shop.  He offers for sale violin
for $100, but know that it’s real price $50.  A says that he is sure the it
is genuine Stradivarius and buys it.  B says nothing.  B is not liable to
A.

      Rest.2nd, §161: A person’s non-disclosure of a fact known to him is
      equivalent  to an assertion that the fact does not exist in the
      following cases only:
            (b)where he knows that disclosure of the fact would correct a
        mistake of the other party as to a basic assumption on which that
        party is making the K and if non-disclosure of the fact mounts to a
        failure to act in good faith and in accordance with reasonable
        standards of fair dealing.
        d) where the other person is entitled to know the fact because of a
           relation of trust and confidence between them
Illustration:
4.    A knows that land has debris, B has no knowledge of it, A doesn’t
disclose it to B, b/c wants to induce a K.  B makes the K.  A’s non-
disclosure is equivalent to an assertion that the land has not been filled
with debris and covered, and this assertion is a misrepresentation.
7.    A, seeking to induce B to make a K to sell land, knows that B does
not know that the land has appreciably increased in value b/c of proposed
shopping center but doesn’t disclose.  B makes K.  Since B’s mistake is not
one as to a basic assumption A’s non-disclosure in not equivalent to an
assertion that the value of the land has not appreciably increased.  K is
not voidable.

      5.-2. Impossibility of  Performance.
            Modern courts are much more willing to discharge a K when its
      performance has become literally impossible.  Most events which under
      the modern view justify discharge for impossibility fall within one of
      the following categories:
     1. destruction or other unavailability of the subject matter of the K
     2. failure of the agreed-upon means of performance;
     3. death or incapacity of a party
     4. supervening illegality

      Destruction or unavailability of the subject matter.   If performance
      of the K involves particular goods, a particular building, or some
      other tangible item, which through the fault of neither party is
      destroyed, or otherwise made unavailable, the K is discharged.  The
      discharge of the K will occur only where the particular subject matter
      is essential to the performance of the K.
      Taylor v. Caldwell:  laid out the doctrine of impossibility through
      destruction of the subject matter.  P contracted to hire the D’s music
      hall for a series of concerts.  After the signing of the K, but before
      the first of the concerts, the hall was destroyed by fire.
            Held: D was discharged from performing, and that his failure to
      perform was therefore not a breach of K.  This conclusion was based on
      the theory that the parties regarded the continued existence of the
      hall as the “foundation” of the K, and that the K contained and
      “implied condition” that both parties would be excused if the hall
      ceased to exist.

      Opera Company of Boston, Inc. v. Wolf Trap Foundation for the
      Performing Arts:  P contracted to give four opera performance at
      Filene Center, operated on Federal land by D.  Prior to the final
      performance, inclement weather caused a power outage that could not be
      remedied prior to performance time.  Performance was canceled by D on
      the advice of the National Park Service.  Then D refused to pay P the
      K price of the final performance.  P sued for breach.  District Court
      refused to D saying that the foul weather had been a foreseeable
      exigency and awarded damages.  D appealed.
            Held: Reversed and remanded.  The impossibility defense may be
      employed even if the exigency(difficulty, emergency)  causing the
      alleged impossibility was foreseeable.  The impossibility defense is
      available upon the occurrence of three conditions: (1) unexpected
      occurrence; (2) the character of such occurrence being such that its
      nonoccurrence was a basic assumption of the parties’ agreement; and
      (3) that the occurrence made performance impracticable.  In present
      case, the adequate power was a basic assumption of the agreement, the
      lack of power was an unexpected occurrence, and the power outage made
      performance impracticable.  The outage may have been foreseeable, but
      rather than relying on the solely, the court should have ruled on
      whether it was so reasonably likely that D implicitly assumed the
      burden of a loss.

Restatement 2nd, ( 214:  Agreements and negotiations prior to or
contemporaneous with the adoption of a writing are admissible in evidence
to establish
a) that the writing is or is not an integrated agreement
b) that the integrated agreement, if any, is completely or partially
   integrated
c) the meaning of the writing, whether or not integrated
d) illegality, fraud, duress, mistake, lack of consideration, or other
   invalidating cause
e) ground for granting or denying rescission, reformation, specific
   performance, or other remedy

Corbin, Contracts: Difference between Statute of Frauds and Parol Evidence
Rule.
Statute of Fraud.
makes certain oral Ks unenforceable by action, if not evidenced by a signed
memorandum

does not exclude any parol evidence, such evidence always being admissible
to show that the writing does not correctly represent the agreement
actually made

does not require that the written memorandum shall be an “integration” of
agreement, although such an integration satisfies its requirements

statute applied because its requirements are not satisfied, and agreement
that may actually have been made is not enforced

when strictly applied, may prevent the enforcement of a K that the parties
in fact made

Parol Evidence Rule
protects a completely integrated writing from being varied and contradicted
by parol

as commonly stated, purports to exclude such evidence.

does not purport to have any operation at all unless such an integration
exists

applied, the court finds that there is a complete integration in writing
and enforces the contract thus evidenced.

the application of PER results in the enforcement of a K that the parties
did not make, if in fact the written document was not agreed upon as a
final and complete integration of terms

Jordan v. Doonan Truck & Equipment, Inc.:  P approached D for the purpose
of buying a used truck.  D purchased the truck, signing a sales agreement
which explicitly (categorically) disclaimed any warranty and stated the
truck was sold “as is”.  The truck subsequently broke down and P sued,
contending D had breached an oral express warranty.  The trial court held
for D, and P appealed, contending the court erred in failing to instruct
the jury that express warranties cannot be waived.
      Held:  No error. Affirmed.  PER may not be admitted to prove oral
express warranties where such warranties are inconsistent with a written
agreement which was meant to be the final and complete agreement between
the parties.  Because evidence of any warranty not included in the written
agreement would necessarily contradict the terms of the agreement, it
cannot be admitted.  Thus regardless of whether the warranty could or could
not be waived, it could not be presented.

Wisconsin Knife Works v. National Metal Crafters:  P pursuant to a K to
supply certain knife blades to Black & Decker, inquired as to D of its
willingness to supply certain metal.  D expressed an interest.  P then
submitted a purchase order K specifying certain delivery dates.  Also in
the order was a clause that the agreement could not be modified except by
writing.  D accepted the offer.  D missed the deadlines, but P accepted
delivery and placed more orders, the same language in the forms.  When
delivery dates were again missed, P terminated the K and sued for breach.
A jury decided that the K had been modified as to time and had not been
breached.  D was awarded $30,000 on a counterclaim.  P appealed.
      Held: Reversed.  K expressly prohibiting modification without written
assent cannot be modified without such assent absent reasonable reliance on
a waiver of the clause.  UCC provides that a signed agreement specifying no
modification absent writing to that effect may be enforced.  That was done
here; by accepting and signing the offer, the clause became controlling.
Absent a waiver, no non-written modification could be affected.
Sec.2.209(4) provides that an attempted modification can operate as such a
waiver.  Whether such a waiver can be found depends on whether the party
against whom the waiver is sought has acted in a manner inconsistent with
enforcing the modification restriction clause, and that the party asserting
waiver has relied on such actions.  In this action, the jury was not
instructed that only reasonable reliance could be a basis for a waiver, and
hence the jury’s finding of a modification could have been based on an
erroneous legal basis.

Parol Evidence Rule Does Not Apply when:
1. A party may always introduce evidence of earlier oral agreements to show
   illegality, fraud, duress, mistake, lack of consideration, any other
   facts which would make a K void or voidable. (if seller lied to buyer re
   condition of the property)
2. Courts usually allow proof of the condition (if parties were orally
   agree on them) to the enforceability of the K, or to the duty of one of
   them, but this condition is then not included in the writing. (A signed K
   with B, but orally agreed that C-expert should approve it, B would be
   allowed to prove that oral agreement was made)
3. Collateral agreements.  An oral agreement that is supported by separate
   consideration may be demonstrated, even though it occurred prior to what
   seems to be a total integration. (A sell B a car, signed a K.  But orally
   agreed that B will keep the car in A’s garage for $15 per month.  This is
   a separate consideration, B may prove that oral agreement occurred even
   though there is an integrated writing that does not include this
   agreement).
4. Subsequent transactions.  PER never bars evidence that after the signing
   of the writing, the parties orally or in writing agreed to modify or
   rescind the writing.
CHAPTER 7.  POLICING THE BARGAINING PROCESS.
Hahn v. Ford Motor Co.:  Breach of warranty case.  P purchased auto from D.
 After consummating the purchase, P became aware of a pamphlet in the glove
compartment which limited the duration of the limited warranty, and
disclaimed liability for consequential damages.  Care had problems, P sued.
 Trial court denial recovery on the basis of the limitations of the
warranty, and P appealed that disclaimer was ineffective b/c it was
inconspicuous, not part of the K, unconscionable, and limited available
remedies in violation of Magnuson-Moss Act.
      Rule: Warranty disclaimers are enforceable where conspicuous, known
to the buyer, not unconscionable as a matter of law, and do not eliminate
the quality commitment.
      Hold: In this case, the disclaimer was printed in bold face and thus
conspicuous.  P’s testimony that he knew of the limitations prior to
purchasing the car show he considered them a part of agreement.
Modifications and limitations on warranties are within the power of t he
parties to bargain over and are not unconscionable per se.  Finally, merely
by limiting the available remedies for breach does not affect the seller’s
commitment to quality.  Thus, the Magnuson-Moss Act is not violated.  As a
result, the limitation in the case was enforceable and properly allowed
into evidence.

      “Lemon Laws”- The M-M Act - Fed. Trade Commission Act referred that
when a consumer product is advertised as having a “full warranty”, if the
product contains a defect or malfunction after number of attempts to fix it
by warrantor, such warrantor must permit the consumer to elect either a
refund for , or replacement w/out charge.  Almost all warranties advertised
to be “limited” rather “full”.  Some states has “lemon laws” (repair within
the reasonable time or replace provision)- applicable to all express
warranties of motor vehicles (CT has the first in 1982).

George Mitchell (Chesterhall)LTd. V. Finney Lock Seeds Ltd.:  P - a group
of farmers, bought defective cabbage seeds from D, those seeds appeared to
be not cabbage.  As per industry custom, D printed the conditions of sale
on the back of its catalogue, including an exemption clause to limit its
liability for defective seeds to replacement or refund of the price.   P
sued for damages and judge awarded nearly $100,000 (but purchase price was
$92).
      Rule: An exclusion or limitation of liability clause will not be
enforced where it is unfair or unreasonable under the circumstances.
      Held: The mistake of selling defective seeds could not have occurred
w/out negligence on the part of D or its suppliers.  P could not insure
against such a risk or discover the defect.
      Rest.2nd, Torts ( 402A:  (1)One who sells any product in a defective
condition unreasonably dangerous to the user or consumer or to his property
is subject to liability for physical harm IF (a) the seller is engaged in
the business of selling such a produce, and (b) it is expected to and does
reach the user or consumer w/out substantial change in the condition in
which it is sold.  (2) It applies also if (a) the seller has exercised all
possible care in the preparation and sale of his product and (b) the user
or consumer has not bought the product from or entered into any contractual
relation with the seller.

CHAPTER 8.   CONDITIONS.
In Re Carter’s Claim: P contracted to purchase the Schoettle Co.(D).  The
agreement was prepared and included several conditions precedent.  One was
that the business was to have a net worth on the date of closing equal to
that on the previous date of appraisal.  On the date of closing company was
worth $70,000 less than appraised.  P contended he could recover the
difference between the value of D on the date of closing and its value on
the date of appraised because the K of sale warranted the company’s net
worth.
      Rule: The remedy for breach of condition is to either accept the non-
conforming conduct or to refuse to proceed under the agreement.
      Hold: The net worth provision could only be viewed as a condition
precedent to P duty to perform, and his sole remedy was to elect to proceed
or cancel an agreement.  He could  not recover damages.

Rest.2nd, (227:  In resolving whether an event is made a condition of an
obligor’s duty … -p.788 ??
Hudson v. Wakefield: Ps contracted to purchase a parcel of real property
from D.  K contained a clause which required a portion of the purchase
price to be paid up fromt as earnest money.  Ps tendered check which was
returned as bound.  Ps attempted to cure this problem, but was rejected by
D.  Ps sued to enforce the sale, contending the earnest money clause was a
convenant, so entire sale could not be canceled.  D successfully moved for
Sum. Judgment on the basis that a clause was a condition precedent to the
fruition of an enforceable K.  Ps appealed.
      Rule:  A K for the sale of real property is enforceable even though a
covenant to pay earnest money is breached.
      Held: In this case the clause was not part of an escrow agreement.
It was part of a fully executed real estate K.  Thus, instead of the clause
being merely a condition precedent to a K, it was one of several covenants
which made up the K.  Thus its breach did not allow d to cancel the sale.
Reversed and remanded.
      Dissent: The payment of the earnest money was a condition precedent
to an enforceable K.

      Rest.2nd, (271: Impracticability as Excuse for Non-Occurrence of a
Condition if the occurrence of the condition is not a material part of the
agreed exchange and forfiture would otherwise result.

Burger King Corp. v. Family Dining Inc.: P granted D an exclusive territory
within which to operate franchised restaurants.  K allowed such exclusivity
for as long as 80 years so long as D kept up with development schedule
requiring it to construct one restaurant a year for 10 years.  D fell
behind in its schedule, yet ultimately built all 10.  A controversy arose
over the building of the final restaurant as P contended the failure to
begin construction on one restaurant per year breached the K and allowed it
to cancel the exclusivity clause.  D defended on the basis that the
schedule was a mere condition and not a promise.
      Rule:  Whether words constitute a condition or a promise is a matter
of the intention of the parties to be ascertained from a reasonable
construction of the language used and the surrounding circumstances.
      Held: In this case, it is clear from the record of dealings that the
main focus of concern was the development of the restaurants and not the
compliance with the schedule.  P on several occasions waived the schedule.
Therefore, it is clear that the intent was that the schedule be a condition
subsequent and not a promise.  As such its breach did not give rise to
cancellation of the K.  Judgment for D.

      Rest 2nd, (230:  Except (2), if under the terms of the K the
occurrence of an event is to terminate an obligor’s duty of immediate
performance or one to pay damages for breach, that duty is discharged if
the event occurs.
      (2) The obligor’s duty is not discharged if occurrence of the event
(a) is the result of a breach by the obligor of his duty of good faith and
fair dealing or (b) could not have been prevented b/c of impracticability
and continuance of the duty does not subject the obligor to a materiality
increased burden.
      (3) The obligor’s duty is not discharged if, before the event occurs,
the obligor promises to perform the duty even if the event occurs and does
not revoke his promise before the obligee materially changes his position
on it.
CHAPTER 9.  PROBLEMS OF PERFORMANCE
Constructive Conditions (as per Emanuel)
Constructive conditions are conditions which are not agreed by the parties,
but which are supplied by the court for fairness.
Order of Performance.
The parties to a bilateral K do not always make clear the order in which
performance is to occur.  If they do, then that order applies, and
substantial perormance of the duty which is due first is a constructive
condition of the other party’s later duty.
1. Periodic payments or other alternating performance.
      The parties may agree that their performances shall alternate.
(Installments payment on K, each installment -for work previously done.
           a) Materiality difficult to determine.
      A party frequently bears a very difficlt burden of determining
whether the other party’s breach is material (failed to substantially
perform).  If he takes a position that there has been such a material
breach, and he cancels his own performance, he runs the risk of later being
held to have responded merely to a non-material breach, and is therefore
himself the first person to breach.  On the other hand, if he is timid, and
goes ahead with his own performance, this performance may turn out to have
been unnecessary and costly.
Walker & Company v. Harrison: P leases a neon sign to D.  The lease
agreement provides that P agrees to maintain and service the sign at its
own expense.  This service includes cleaning, repairing and repainting of
sign in original color scheme as often as necessary to keep sign in first
class advertising condition and make.  Shortly after someone hits the sigh
with tomato. It staarts to rust slightly, and little “spider cobwebs” form
in its corners.  D call P several times to ask for maintenance.  2 months-
no response, D send a telegram, cancelling the K and stating that no
further payments will be made.  Week later P fixs the sign, but D still
refuses to pay, and P sues.
      Held: P’s failure to give maintenance may have been a breach of the
K, but it was not material breach, which is what is needed to release D
from the K. (the cobwebs could have been cleaned off by D, there could not
have been much rust so soon after the installation; the tomato stain was
probably partly washed off by the rain).  Therefore, D, by not paying, was
the first to breach.  The injured party’s determination that there has been
a material breach, justifyin his own repudiation, is fraught with peril,
for should such a determination, as viewed by a later court in the calm of
its contemplation, be unwarranted, the repudiation himself will have been
guily of a material breach and himself have become the aggressor.

2.  Where no order of performance agreed upon:
If the parties do not agree upon the order of performance, the courts apply
several general rules to determine the order.
     a) Where only one party’s work requires perod of time, and the other’s
        does not, the performance requiring time must ordinarily occur
        first, and its perfomance is a constructive condition to the other
        party’s performance. Rest.2nd, § 234(2).
The principe is appiable to Ks for services.  A party who is to perform
work will be held obligated to subastantially complete that work before he
may receive payment. (The rule assumes that the parties have not reached an
express or implied agreement for periodic patment.)
Stewart v. Newbury:  P contracts to do certain construction work for D.
The written K contains no provision regarding when payment will be made.  P
works for a month, then submits a bill for that month’s work; D refuses to
pay, claiming that nothing is due until the entire job is completed.  P
walks off the job and sues.
      Held: if the parties reached an oral agreement regarding time of
payment, or both understood that there was a certain coustom regarding
patment (e.g. 85% of each month’s work paid at the end of the month, as P
claims was the custom), this will be enforced.  But if there was no such
agreemen or custom, P was not entitled to anything until he finished the
job, and his walking off before that was a breach on his part.  WHERE A k
IS MADE TO PERFORM WORK AND NO AGREEMENT IS MADE AS TO PAYMENT, THE WORK
MUST BE SUBSTANTIALLY PERFORMED BEFORE PAYMENT CAN BE DEMANDED.

      Rest.2nd, (234 Illustrations:
9. A contracts to do the concrete work on a building being constructed by B
   for $10 a cubic yard.  In the absence of language or circmust. Indicating
   the contrary, payment by B is not due until A has finished the work.
10. The facts being otherwise as stated in #9, B promisses to funish a bond
   to secure his payment.  No provision is made as to the time for funishing
   the bond.  The doing of the work by A requires a period of time and the
   funishing of the bound by B does not, thecircumst. That the bond is
   required to secure payment by B indicates that B must funsih the bond
   first.
CHAPTER 10.  THIRD PARTY BENEFICIARIES.
A party may form K the main purpose of which is to benefit not himself, but
a third person. The Q is can Third Party sue.  Early American Com.
Law,(still in effect in few states: No).  The early cases, and the first
Rest. Allowed a third party beneficary to sue only if he was either
CREDITOR BENEFICIARY or DONEE BENEFICIARY.
      Rest. 2nd  instead of CB and DB divided into a class of “intended
beneficairies” (who have rights to enforce the promise made for their
benefit) and “incidental beneficiaries” (who do not).
      Intended beneficiary -if recognition of a right to performance in the
beneficiary is appropriate to effectuaate the intention of the parties and
either (a) the performance of the promise will satisfy and obligation of
the promisee to pay money to the beneficiary; or (b) the circumstances
indicate that the promisee intends to give the beneficiary the benefit of
the promised performance.

      Donee beneficiary.  If the promisee entered K for the purpose of
conferring a gift on the Third Pary, the Third Party is said to be a “donee
beneficiary”, and is given the right to sue the promisor.  Reason: if TP
can’t, nobody can sue and promisor would be unjustly enriched.

Seaver v. Rainsom: X, who is dying, wants to leave her house to her niece,
P.  X’s present will leaves the house to X’s husband, D.  Becauser X will
probably not live long enough for a new will to be drafted, D promises her
that if she keeps her will the same, he will leave P enough money in his
will to make up to P for not getting the house.  After X’s death, D fails
to keep his promise in his own will, and after his death P sues his estate
for the value of the house.
      Held: P may recover as a donee beneficiary of the agreement between X
and D.  P is the only one damaged by D’s breach of promise.  The cases have
for a long time enforced promises to take care of the promisee’s spouse or
child; this same prinicple should be applies where, as here, the
beneficiary is the promisee’s beloved niece.

      Creditor Beneficiary.  If the promisor has promised to discharge a
debt owed to the third party by the promisee, the third party is called a
“creditor beneficiary”, who allowed to sue. Reason: multiple law suits are
prevented; no danger that the suit by the creditor against the promisee on
the original debt will be followed by a suit by the promisee against the
promisor.

Choate, Hall & Stewart v. SCA Services: Stein was a major SH and director
of D and belonged to one faction seeking control of the company.  The
control dispute led to an SEC investigatin and in retrun for his
resignation, Steir was promised, in a written K, that D would pay all his
legal expenses incurred in defending the SEC action.  K called for D to
make payments directly to the law firm representing Steir.  P, the firm who
represented Steir, sued D to compel it to honor its legal bills.  Trial
court granted summary judgment on the basis P was not in privity of K with
D and, thus, lacked standing to sue for breach.  P appealed.
      Rule: A creditor beneficiary may sue to recover on a K executed by
two other parties.
      Held:   Reversed and remanded.  In this case the fact that payments
were to be made directly to the law firm rather than to Steir shows that a
third party was the actual intended beneficiary.  As a result, P  could sue
a third party beneficiary.
CHAPTER 11.  ASSIGNMENT AND DELEGATION.
“Delegation” refers to duties under a K, not to rights.  If a party to a K
wishes to have another person perform his duties, he delegates them.
      When the performance of a duty is delegated, the delegator remains
liable.
      Non-delegable duties: Generally, a duty of performance is delegable,
unless the obligee has a substantial interest in having the delegator
perform.(particular skills, professional service: doctor, lawyer).

Delagatee’s liability: 2 forms.
1. delegator give to delegatee the option to perform, when delegatee gives
   no promise to perform - delegatee NOT liable either delagator or the
   obligee
2. delegatee may promise that he will perform - May Or May Not be liable to
   the obligee.  That is the obligee may or may not be a Third Party
   Beneficiary.  This is Q of intent of the parties (even if Delagator
   didn’t have agreement w/Obligee, but intented to, delegatee will be
   liable for breach).

Assignment of the K.
If a party purports to “assign the C” to a third person - will be
interpreted as a promise by the assignee to perform, and the obligee will
be an intended beneficiary of this promise.  So, assignee will be liable.
      Sale of land. An assignment of  K made by a vendee under a land
Contract will not usually be found to follow this rule.  The assignee under
a land sale K usually does not incur liability to the original seller.
      UCC.  Follows the common-law rule: An assignment of the K is an
assignment of rights and unless the language or circumstances indicate the
contrary, it is a delegation of performance of the duties of the assignor
and its acceptance by the assignee constitutes a promise by him to perform
those duties.  This promise is enforceable by either the assignor or the
other party to the original K.
      Securities.  If a general assignment is made for the purpose of
giving collateral to the assignee in return for a loan, the lender will not
normally be deemed to have undertaken to perform the assignor’s duties.
      .
Langel v. Betz: P contracts to sell a piece of land to X and Y.  X and Y
(the vendes) assign the K to Z, who in turn assigns it to D.  At D’s
request, the date for closing is extended.  On the new closing date, P is
ready, willing, and able to deliver the deed to D, but D refuses to
consummate the sale.  P sues D for specific performance.
      Held: for D. D didn’t expressly or impliedly accept any duties by
taking the assignment.  Therefore, he has no obligation to perform.  The
mere assignment of a bilateral executory K may not be interpreted as a
promise by the assignee to the assignor to assume the performance of the
assignor’s duties.
      Had D subsequently promised P that he would perform, the result would
have been different.  But D’s request for an extension did not amount to a
promise by him to perform, since it could equally well have signified
merely that D was unsure about whether or not he would perform.

Rest.2nd, (322:
1) Unless the circumstances indicate the contrary, a K term prohibiting
   assignment of “the contract” bars only the delegation to an assignee of
   the performance by the assignor of a duty or condition.
2) A K term prohibiting assignment of rights under the K, unless a
   different intention is manifested,
     c) does not forbid assignment of a right to damages for breach of the
        whole K or a right arising out of the assignor’s due performance of
        his entire obligation.
     d) gives the obligor a right to damages for breach of the terms
        forbidding assignment but does not render the assignment
        ineffective;
     e) is for the benefit of the obligor, and does not prevent the
        assignee from acquiring rights against the assignor or the obligor
        form discharging his duty as if there were no such prohibition.
Rest.2nd, (328:
1) Unless the language or the circum. indicat the contrary, as in an
   assignment for security, an assignment of “the contract” or of “all my
   rights under the K” or an assignment in similar general terms is an
   assignment of the assignor’s rights and a delegation of his unperformed
   duties under the K.
2) Unless..., the acceptance by an assignee of such an assignment operates
   as a promise to the assignor to perform the assignor’s unperformed
   duties, and the obligor of the assigned rights is an intended beneficiary
   of the promise.  NO opinion re application of this rule  to K for the
   sale of land.
Comment:  Land Contracts.

American Bridge Co. of NY v. City of Boston: C assigned to P his right to
collect the proceeds due or to become due on his K with the D.  C then
defaulted on the K.  P seeks to recover the full K amount.
      C, an architect, had 2 building Ks with D.  He assigned his right to
all moneys due or to become due under it to P.  Shortly after the D was
notified of the assignment, C abandoned the work and did not complete
performance of the K.  P seeks to recover the full K amount, contending
that the full amount was due and payable at the time the D received notice
of the assignment, and that P rights were fixed at the time of notice and
could not be changed by any act of the assignor or the D.
      Rule: Where a debtor has received notice of the assignment of a K
debt owed by him.  He can recover the damages he sustains by reason of the
subsequent default of the assignor.
      Held: The assignment of a chose in action conveys, between the
assignor and the assignee, only such rights as the assignor then possesses.
 However, between the assignee and the debtor, such an assignment does not
become operative until the time of notice to the debtor, and does not
change the rights of the debtor against the assignor as they exist at the
time of the notice.